Corporate Governance

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Sustainable Management

To better improve corporate governance standards, and to fulfill our corporate social responsibility, and to establish a moral standard of ethical management, corporate culture, and drive colleagues to adhere to high moral standards, SinoPac Holdings on December 20, 2017 and on February 2, 2018, the Board of Directors approved the "Corporate Governance Best Practice Principles", "Code of Conduct", and "Principles for Corporate Social Responsibility". In accordance to the Code of Conduct, we established a "Ethical Business Committee", responsible for policies of ethical behavior and establish rules for prevention and supervision. Plans for a "whistleblower" policy and its effectiveness is also evaluated. According to the "Principles for Corporate Social Responsibility", we establish a "Sustainable Development Committee", responsible for the policies of CSR, regulations, and other guidelines and plans for implementation and execution, with regular reporting to the Board of Directors.

Sustainable Development Committee

In January 2018, we passed the "Principles of SinoPac Holdings Corporate Social Responsibility", and in March 2018 established the "Sustainable Development Committee", with the holding company chairman as the committee chair, developing 5 promotional teams, respectively, Corporate Governance, Customer Relations, Employee care, Social Involvement, and Sustainable Environment. Together, we aim to achieve our social corporate responsibility policy and manage holding company and subsidiaries' operational activities and its risk and impact on economics, the environment,
and society.

2017 Corporate Governance Evaluation and Improvement Plan

In 2017, SinoPac Holdings continues to strengthen corporate governance, retaining an external management consulting firm to execute a review of the holding company and subsidiaries, including the following 6 companies, Bank SinoPac, SinoPac Securities, SinoPac Securities (Asia), SinoPac Leasing, Grand Capital. The scope of the review included corporate governance, auditing, compliance, and risk management operations.

The review indicated that SinoPac have implemented policies and rules as required by law. However, the execution of such policies have areas of improvement. Together with the request of domestic regulatory agencies, the Board of Directors proposes the following 5 major action plan.

Three Levels of Internal Controls

Ethical Management

SinoPac Holdings developed a more comprehensive governance structure, guidelines, and risk management strategy, enabling the holding company and subsidiaries can better adhere to regulations and achieve information distribution and communications. In addition to policies, we also strengthen our training and information distribution to our directors, senior management, and staff, enabling a higher standard of ethical management and efficiency.

1. Code of conduct

To implement our corporate governance policies, SinoPac Holdings informs directors of any continuing education opportunities in regards to corporate governance. In 2017, 8 directors have participated in corporate governance continuing education in adherence to the rules in the " Directions for the Implementation of Continuing Education for Directors and Supervisors of TWSE Listed and TPEx Listed Companies."

Concurrently, in accordance with the labor standards laws and relevant rules, we have established "work rules", "employee service standards", "rules governing employee rewards and discipline", and other internal rules as the ethical guidelines for our Company and subsidiary colleagues. We clearly establish and provide our rules and service standards, ethical guidelines, and reward and discipline rules to all our employees, available in our Company intranet.

If there are any violations of the code of conduct, fraud, or bribery that is reported, HR personnel in conjunction with compliance and auditing personnel shall open an investigation and implement punishments as required. In 2017, no such cases have been opened.

Importantly, during new hire induction, all colleagues are introduced to the code of conduct and the importance emphasized to all colleagues to ensure the rules and standards are familiar. In the annual evaluation, the compatibility and execution of these standards are considered, as well as their personal records of rewards and demerits, and other comprehensive KPIs. Combined, the results of these performance assessments are reflected in their annual bonuses.

To prevent unethical actions, the holding company and subsidiaries have established effective accounting policies and internal control policies. By law, the Company shall not establish separate books or secret accounts. Moreover, in all operations, colleagues of the holding company and subsidiaries shall not directly or indirectly offer or receive bribes, promises, or unethical profits, or act against ethical standards, existing laws, or act against their fiduciary duty as custodians. In 2017, subsidiary, Bank SinoPac per its auditing rules and procedures have ensured no such cases have occurred.

The evaluation of all accounting policies, internal control policies and operations, are scheduled in the scope of the regular audits, and results will be submitted to the Board of Directors, by internal audit personnel of the holding company and subsidiaries.

2. Educational Training

For new colleagues, new hire induction training includes training by dedicated personnel or supervisors on the aspects of professional ethics, ethical guidelines, and relevant internal rules and external laws, emphasizing and strengthening the understanding of "ethical management".

Banks particularly emphasize sales discipline training on anti-corruption policies, which involves wealth management, retail banking, insurance sales, and highlights certain precautions. Training using case studies of restricted sales behavior are held regularly for distribution channel supervisors and sales personnel, and are held in the north, central, and south regions, respectively.

Risk Management

SinoPac Holdings has established a complete and effective risk management mechanism, separating into the following three areas: "Risk Management Culture", "Risk Management Policy and Procedures", and "Emergency Response Reporting", to ensure stable management concurrent with the pursuit of profits.

1. Risk Management Culture

We have established a dedicated risk management unit to deliberate the risk management policy, and to effectively management the different types of risks emerging from operations, as per the policy and strategic principles. Establishing a risk management information system and through risk adjusted asset allocation, we seek a rationalization of risk and return, and improve overall operational efficiency. Proactive improvements of major risks through the internal auditing system, tracking and reporting updates regularly to the Board of Directors.

 

2. Risk Management Policies & Procedures

SinoPac Holdings has a clear risk management structure, split into 4 dedicated levels, namely, the Board of Directors, the Risk Management Committee, the Risk Management Division, and at the front-line level of auditing units with clear separation of duties and responsibilities. We have established complete risk guidelines and limits, enabling an appropriate balance between profitability and risk.

3. Emergency Notification Mechanisms

Bank SinoPac has established the "Bank SinoPac Emergency Response Rules", clearly listing the reporting procedures for emergency events, such as for man-made or natural disasters, internal control failures, major procedural errors, business-related losses, cybersecurity, human safety matters, that results in each unit in failing to operate regularly.

In the event of an emergency, first responses are done via telephone, text, or other appropriate methods in informing related personnel, and depending on the importance of the case, reported to related units, then passed on to the decision-making unit and escalated upwards as needed. This procedure ensures that losses and client rights are protected to the fullest.

Auditing Mechanism

SinoPac Holdings strictly executes a third line of defense in risk management with an independent internal auditing unit with sufficient personnel and internal auditing colleagues with appropriate risk management expertise, enabling the evaluation of the appropriateness of risk management tools. In 2017, we established AN appropriate audit plan and procedures, and sufficiently understand the risk management procedures and operating status of each operating unit. After the risk management evaluation, the following items were
noted:

Legal Compliance

To ensure that colleagues from all units are compliant with all relevant laws and regulations during the ordinary course of business, the legal compliance division in 2017 strengthened its activities. The team improved the execution of its self-evaluation, update of relevant laws, review of its rules, and evaluated the execution of special projects of subsidiaries, and strengthened communication and educational training through multiple channels to improve legal compliance.